Question

Buzzard Bicycle specializes in custom painting and design of bicycles. December 31 is the company's fiscal year-end. Information necessary to prepare the year-end adjusting entries appears below. 1. A three-year fire insurance policy was purchased on July 1, 2021, for $23,100. The company debited Prepaid Insurance for the entire amount 2. Employee salaries of $28,400 for the month of December will be paid in early January 3. On November 1, 2021, the company received $11,100 in cash from a customer requesting a custom design for six identical bikes ($1,850 each). Deferred Revenue was credited for the entire amount. By the end of the year, four of the bikes have been completed. 4. Supplies at the beginning of the year totaled $5,400. During 2021, additional supplies of $21,400 were purchased, and the entire amount was debited to Supplies Supplies remaining at the end of the year total $7,400. 5. Buzzard paid a local radio station $15,400 for four months of advertising on December 1, 2021. The advertising will appear evenly over the four-month period. The company debited Prepaid Advertising for the entire amount 6. Buzzard borrowed $41,100 on March 1, 2021. The principal is due to be collected in five years. Interest is receivable each March 1 at an annual rate of 10% Required: Record the necessary adjusting entries on December 31, 2021 (Do not round intermediate calculations. If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

Answer 1

Date	General Journal	Debit	Credit
December 31	Insurance expense	$3,850
	Prepaid insurance		$3,850
	( To record insurance expense)
December 31	Salaries expense	$28,400
	Salaries payable		$28,400
	( To record salaries expense)
December 31	Deferred revenue	$7,400
	Revenue		$7,400
	( To record deferred revenue earned)
December 31	Supplies expense	$19,400
	Supplies		$19,400
	( To record supplies expense)
December 31	Advertising expense	$3,850
	Prepaid advertising		$3,850
	( To record advertising expense)
December 31	Interest expense	$3,425
	Interest payable		$3,425
	( To record interest expense)

1.

Insurance expense for 3 year = $23,100

Insurance expense for 6 months (from July 1 to December 31) = 23,100 x 6/36

= $3,850

3.

Revenue for 1 bike = $1,850

Revenue for 4 bikes = 1,850 x 4

= $7,400

4.

Beginning supplies = $5,400

Supplies purchased = $21,400

Ending supplies = $7,400

Supplies expense = Beginning supplies+ Supplies purchased- Ending supplies

= 5,400+21,400-7,400

= $19,400

5.

Advertising expense for 4 months = $15,400

Advertising expense for 1 month = 15,400 x 1/4

= $3,850

6.

Interest payable on December 31, 2021 = Note payable x Interest rate x 10/12

= 41,100 x 10% x 10/12

= $3,425

Kindly comment if you need further assistance.

Thanks‼!